The "lemons problem" exists because of
A)transactions costs.
B)economies of scale.
C)rational expectations.
D)asymmetric information.

Question

Quizplus · Accepted Answer

The "lemons problem" is a well-known market failure that occurs due to asymmetric information, where one party has more or better information than the other party. In this case, sellers have more information about the quality of the product they are selling, and buyers cannot differentiate between high-quality and low-quality products. This results in a market dominated by low-quality products, which drives out the high-quality products from the market.

The "Lemons Problem" Exists Because of